Collective efforts from
private firms, the government and low-income earners will alleviate income
inequality in Singapore in the long run.
In his TED talk, Goldin (2009) mentions that ‘the glory of globalization
could also be its downfall’. According to him, among the problems that entail
this progress is growing inequality among the population. This issue is not
unfamiliar in Singapore. Despite having enjoyed positive real economic growth
since 2009[1],
the income gap between the higher and lower strata has been steadily immense[2].
Nevertheless, the government has been implementing measures and policies to
curb this problem. Among those that are being actively employed are subsidies
on consumption products such as utilities, public transportation and education.
In fact, the Department of Statistics Singapore (February, 2014) reported that
the Gini coefficient in 2013 decreased from 0.463 to 0.412 after accounting for
government transfers and taxes, which include provision for these subsidies.
However, such provisions are not economically and socially sustainable in
varying degrees and some may even worsen the income distribution gap in the
long run.
The GST Voucher scheme, which was introduced in 2012, is a point to
illustrate. Through this annual scheme, the lower-and middle-income earners are
entitled to a certain amount of cash reimbursement for payable goods and
services tax as well as a one-time subsidy for their utility bills. The purpose
of this scheme is to support their daily expenses. But such benefits fall short
of generating long-term benefits for the society and individuals. There are
indeed other schemes as well, such as the Workfare Income Supplement Scheme and
Post-Secondary Education Scheme, which potentially generate more positive spill
over in the long run by encouraging workers and students to enhance their
skills and employability. All these schemes have common characteristics; although
they are beneficial for the low-income earners, they are formulated based on an
unstable fiscal framework of redistribution of wealth – the transfer of money,
in the form of tax payment, from higher earners to the less wealthy. This
social fallacy is detrimental to the well being of the society in the long run.
In the effort to alleviate the prevalent issue of income inequality,
instead of putting heavy reliance on wealth distribution, the responsibility to
narrow the income gap has to be jointly shared among three parties; private
firms, the government and the low-income earners.
In order to remain relevant, local private firms need to break away from
the traditional business model that focuses solely on making profits. Being
socially involved is now one of the keys to business growth. This idea stems
from the term ‘connected capitalism’. Coined by Isdell, former chairman and CEO
of The Coca Cola Company, it has now become a global effort by firms to
re-orient capitalism into a mechanism not only for profit, but also for social
good. Translating this in Singapore’s perspective, the local technological
based start-ups can help workers to keep up with technological advances by providing
basic interactive programming tutorials online for free. This is a method
endorsed by Code.org, a social organization that aims to provide the
opportunity for every student to learn computer programming. For the local
firms, they can still generate profits through other sources of revenue such as
offering intermediate programming classes. By integrating this social cause to
the business model, the national technological literacy will eventually see
great improvements. The current workforce will be able to better match the
growing demand for higher skilled workforce thereby improving the real wage.
The government is the key support in this tripartite social framework.
Besides providing schemes to assist the low-income earners, incentives such as
the Productivity and Innovation Credit are also rewarded to firms that provide
training accredited by Singapore Workforce Development Agency to their
employees. It is essential for the government to place more investment on
schemes that encourage the lower-income earners to attend skill-upgrading
courses while limiting schemes that only have short-term beneficial outcomes
such as the GST Voucher Scheme. Not only is this system a well-regarded
justification for the redistribution of wealth, it is a strategy that will
alleviate income disparity in the long run.
The ultimate source of responsibility has to come from the low-income
earners and their willingness to improve. Instead of heavily depending on the
government for subsidies on necessities, low-skilled workers need to be open to
changes and equip themselves with the skills and knowledge that are relevant in
today’s workforce. Their attitude towards acquisition of such valuable assets
determines the state of their income.
In conclusion, sustainable inclusive growth of low-income earners
requires the collective efforts of the three parties. This framework of
interdependency may not be as easy to achieve because there are immediate
sacrifices. Businesses have to allocate resources for the social good.
Individuals have to spend the time off work to enrol in classes. The government
requires sufficient revenue to issue the subsidies. But if everyone involved
believes in the common goal of building a better community, the long-run
trade-off is worthwhile. Moving forward, Singapore will be able to build a more
sustainable economy that will benefit all the three parties by mitigating
income disparity.
(Word count: 832 words)
References
Department of Statistics Singapore. (2014, February 20). [Graph
illustrates the real economic growth of Singapore from 1999-2013]. Retrieved
March 08, 2014 from http://www.singstat.gov.sg/statistics/visualising_data/chart/Real_Economic_Growth.html
Department of Statistics Singapore. (2014, February). Key Household Income Trends, 2013, 12. Retrieved
from http://www.singstat.gov.sg/Publications/publications_and_papers/household_income_and_expenditure/pp-s20.pdf
Goldin, I. (2009, July). Navigating our global future [Video file].
Retrieved from http://www.ted.com/talks/ian_goldin_navigating_our_global_future
Isdell, N., & Beasley, D. (2012, October 16). Inside Coca-Cola: A CEO’s Life Story of Building the World’s Most
Popular Brand. London, UK: St. Martin’s Press.
[1] The total annual economic growth in
Singapore in 2009 was -0.5% while the succeeding years up to 2013 have seen
positive growth rates (Department of Statistics Singapore, February 20, 2014).
[2] The Gini coefficient of the country was
generally 0.40 to 0.49 between 2003 and 2013. It is equal to zero in the case
of total income equality and to one in the case of total inequality (Department
of Statistics Singapore, February, 2014).
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